Chapter 2 of Title 27 of the Code of the Federated States of Micronesia - Federated States of Micronesia Petroleum Corporation

1 Section 1. The Code of the Federated States of Micronesia, 2 as amended, is hereby further amended by enacting a new title 27 3 entitled "Essential Services".

4 Section 2. The Code of the Federated States of Micronesia, 5 as amended, is hereby further amended by enacting a new chapter 1 6 of title 27 which shall be titled "Reserved".

7 Section 3. The Code of the Federated States of Micronesia, 8 as amended, is hereby further amended by enacting a new chapter 2 9 of title 27 which shall be entitled "Federated States of

10 Micronesia Petroleum Corporation Act of 2007".

11 Section 4. The Code of the Federated States of Micronesia, 12 as amended, is hereby further amended by enacting a new section 13 201 to chapter 2 of title 27 as follows:

14 "Section 201. Short title. This chapter may be cited 15 as the "Federated States of Micronesia Petroleum

16 Corporation Act of 2007"."

17 Section 5. The Code of the Federated States of Micronesia, 18 as amended, is hereby further amended by enacting a new section 19 202 to chapter 2 of title 27 as follows: CBL 15-42 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 "Section 202. Definitions. For the purposes of this 2 chapter and subsequent regulations, the following 3 definitions shall apply unless the context otherwise 4 requires:

5 (1) "Board" means the Board of Directors appointed 6 under section 213;

7 (2) "CEO" means the Chief Executive Officer appointed 8 under section 231;

9 (3) "Chairperson" means the Chairperson of the Board;

10 (4) "Congress" means the Congress of the Federated

11 States of Micronesia;

12 (5) "Corporation" means the Federated States of

13 Micronesia Petroleum Corporation;

14 (6) "Executive Council" means the President of the

15 Federated States of Micronesia and the Governor of each

16 State. As used herein, consent, approval or instruction 17 of the Executive Council shall mean such consent, 18 approval or instruction taken with the unanimous consent 19 of the President and each Governor. For the avoidance 20 of doubt, a written resolution of the Federated States 21 of Micronesia Economic Policy Implementation Council, 22 duly signed by the President and each Governor, shall 23 constitute such an instruction notwithstanding the fact 24 that it is also executed by other officials;

25 (7) "FSM" means the Federated States of Micronesia; 2 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (8) "Officer" includes any employee of the Corporation 2 vested with a power or duty in accordance with this

3 Chapter;

4 (9) "Premises" means any piece of land and if there 5 are buildings of any sort erected on that land, includes 6 those buildings, and also includes a ship or other 7 vessel;

8 (10) "Product" or "Products" means petroleum products 9 including automotive and industrial diesel fuels, 10 gasoline, unleaded petrol, kerosene, Jet A1, lubricants 11 and any other petroleum or alternative fuel products 12 that may now be available or that may become available 13 in the future;

14 (11) "Secretary" means the Secretary of Finance and

15 Administration of the Federated States of Micronesia;

16 (12) "State" means a State of the Federated States of

17 Micronesia;

18 (13) "Works" or "Works of the Corporation" includes the 19 whole of the petroleum storage and dispensing systems 20 and associated works owned, controlled or managed by the

21 Corporation for any purpose associated with its 22 functions under this Act."

23 Section 6. The Code of the Federated States of Micronesia, 24 as amended, is hereby further amended by enacting a new section 25 211 to chapter 2 of title 27 as follows: 3 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 "Section 211. Establishment of Corporation. The

2 Federated States of Micronesia Petroleum Corporation is 3 hereby established as a public corporation under the 4 laws of the Federated States of Micronesia. It may 5 hereinafter be referred to as "the Corporation"."

6 Section 7. The Code of the Federated States of Micronesia, 7 as amended, is hereby further amended by enacting a new section 8 212 to chapter 2 of title 27 as follows:

9 "Section 212. Independence. The Corporation shall not 10 be deemed to be a government department, board or agency 11 and as such is not subject to the laws governing the 12 activities of the government including but not limited 13 to title 52 (the Public Service System Act) and title 55

14 (The Financial Management Act); provided, however, that 15 nothing herein shall be deemed to waive the Corporations 16 responsibility to comply with the Financial Management

17 Act if allotted government funds."

18 Section 8. The Code of the Federated States of Micronesia, 19 as amended, is hereby further amended by enacting a new section 20 213 to chapter 2 of title 27 as follows:

21 "Section 213. Board of Directors of the Corporation.

22 The affairs of the Corporation shall be managed and its 23 corporate powers exercised by a Board of Directors, 24 hereinafter referred to as ‘the Board.’"

25 Section 9. The Code of the Federated States of Micronesia, 4 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 as amended, is hereby further amended by enacting a new section 2 214(a) to chapter 2 of title 27 as follows:

3 "Section 214(a). Appointment and Termination of

4 Directors.

5 (1) The Board shall be composed of seven voting 6 members as follows:

7 (a) one director appointed by the President of 8 the FSM with the advice and consent of Congress;

9 (b) one director appointed by the Governor of the

10 State of Chuuk with the advice and consent of the Chuuk

11 State Senate;

12 (c) one director appointed by the Governor of the

13 State of Kosrae with the advice and consent of the

14 Kosrae State Legislature;

15 (d) one director appointed by the Governor of the

16 State of Pohnpei with the advice and consent of the

17 Pohnpei State Legislature;

18 (e) one director appointed by the Governor of the

19 State of Yap with the advice and consent of the Yap

20 State Legislature; and

21 (f) two directors appointed by the President of 22 the FSM with the advice and consent of Congress from a 23 list of private sector candidates nominated by the four

24 State governors.

25 (2) The persons appointed under subsection 214(a)(1) 5 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 must have experience in public administration, 2 environmental matters, finance, or oil and gas 3 distribution. At least one person appointed under 4 subsection 214(a)(1)(f) must have special knowledge and 5 capacity in the field of oil and gas distribution.

6 (3) No person appointed under subsection 214(a)(1) nor 7 any member of his or her immediate family may possess 8 any pecuniary interest in any business or entity which 9 derives any part of its revenue from the distribution of 10 oil or gas in the Federated States of Micronesia.

11 (4) The persons appointed under subsection 214(a)(1) 12 hold office for a term of three years, provided, 13 however, that the initial terms of office shall be 14 determined by lot at the first meeting held by the Board 15 with three members serving an initial term of one year, 16 two serving an initial term of two years and two serving 17 an initial term of three years. Provided further, that 18 if no replacement has been appointed prior to the 19 expiration of a director’s term, he or she shall 20 continue to serve for an additional period of 90 days or 21 until a replacement is appointed, whichever is less.

22 All members are eligible for reappointment.

23 (5) Vacancies on the Board shall be filled for the 24 unexpired portion of the term in the same manner as 25 originally filled. 6 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (6) The Board may, at any time by majority vote, 2 remove any director for failure to attend three 3 consecutive meetings of the Board, or for neglect of 4 duty or malfeasance in office."

5 Section 10. The Code of the Federated States of Micronesia, 6 as amended, is hereby further amended by enacting a new section 7 214(b) to chapter 2 of title 27 as follows:

8 "Section 214(b). Transitional Board of Directors.

9 Notwithstanding section 214(a), the President and the

10 Governors of the States of Chuuk, Kosrae, Pohhpei and

11 Yap shall have the authority to appoint a transitional

12 Board of Directors, whose tenure shall not exceed six 13 months. The transitional Board shall consist of five 14 members whose appointments are not subject to advice and 15 consent by Congress or any branch of a State

16 Legislature. One of the members shall be chosen by the

17 President of the FSM and one shall be chosen by each of 18 the Governors of the four FSM States. Appointment to 19 the transitional Board shall not preclude a permanent 20 appointment under section 214 (a) and a permanent 21 appointment pursuant to subsection 214(1)(a, b, c, d, or 22 e) shall immediately replace a person appointed to the 23 transitional Board pursuant to this section. All other 24 requirements of section 214(a) shall apply to the 25 transitional Board. The initial meeting of the 7 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 transitional Board may be called at any time after four 2 of the five members have been appointed.

3 Section 11. The Code of the Federated States of Micronesia, 4 as amended, is hereby further amended by enacting a new section 5 215 to chapter 2 of title 27 as follows:

6 "Section 215. Chairperson of the Board. The

7 Chairperson of the Board shall be chosen by the Board 8 members by majority vote and shall serve for a term of 9 one year from the date of selection. The Chairperson may 10 authorize, in writing, any director to exercise any 11 power or perform any function conferred on the

12 Chairperson by or under this Act."

13 Section 12. The Code of the Federated States of Micronesia, 14 as amended, is hereby further amended by enacting a new section 15 216 to chapter 2 of title 27 as follows:

16 "Section 216. Meetings of the Board.

17 (1) The Board must meet as often as may be necessary 18 for the performance of its functions, provided that it 19 shall meet no less than once per quarter each calendar 20 year and provided, further, that at least two such 21 meetings shall require the physical presence of the 22 directors at a single location.

23 (2) At any meeting, the quorum of the Board is a 24 majority of the total directors appointed at the time of 25 the meeting. 8 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (3) Notice of a meeting of the Board must be given to 2 each director and shall be delivered by hand or sent by 3 post, facsimile, electronic mail or other written 4 message to an address supplied by the director to the

5 Board for this purpose.

6 (4) Decisions at meetings of the Board are taken by a 7 simple majority of the directors present and voting.

8 (5) Subject to this section, the Board may regulate 9 its own procedure.

10 (6) The validity of a proceeding of the Board is not 11 affected by a vacancy in the membership or by any defect 12 in the appointment of a director."

13 Section 13. The Code of the Federated States of Micronesia, 14 as amended, is hereby further amended by enacting a new section 15 217 to chapter 2 of title 27 as follows:

16 "Section 217. Transaction of Business Without Meeting.

17 A resolution of the Board is valid, even though it was 18 not passed at a meeting of the Board, if -

19 (1) it is signed or assented to by no less than five 20 directors of the Board; and

21 (2) a notice in writing of the proposed resolution was 22 given to each director no less than 7 Days before the 23 resolution is assented to by any director."

24 Section 14. The Code of the Federated States of Micronesia, 25 as amended, is hereby further amended by enacting a new section 9 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 218 to chapter 2 of title 27 as follows:

2 "Section 218. Remuneration of Directors. Directors who 3 are employees of the national government of the FSM or a

4 State government shall receive no additional 5 compensation for their service as members of the Board.

6 The compensation of members who are not Government 7 employees shall be as determined by the Board and 8 published in the minutes and annual report of the Board.

9 Section 15. The Code of the Federated States of Micronesia, 10 as amended, is hereby further amended by enacting a new section 11 219 to chapter 2 of title 27 as follows:

12 "Section 219. Disclosure of Interest.

13 (1) A director of the Board who has a direct or 14 indirect personal interest in the outcome of any matter 15 before the Board must disclose the interest to the

16 Board.

17 (2) The disclosure of an interest under subsection (1) 18 must be recorded in the minutes of the Board.

19 (3) After making a disclosure under subsection (1), 20 the director -

21 (a) in the case of a meeting, must withdraw from 22 the meeting before the commencement of deliberations of 23 the Board in respect of the matter referred to in 24 subsection (1), although the director may be counted for 25 the purposes of forming a quorum of the Board at the 10 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 meeting; and

2 (b) in any case, must not vote on the matter."

3 Section 16. The Code of the Federated States of Micronesia, 4 as amended, is hereby further amended by enacting a new section 5 220 to chapter 2 of title 27 as follows:

6 "Section 220. Minutes of Meetings and Business

7 Transacted. The Board must keep minutes of all its 8 meetings and business transacted under section 216 and 9 217 in a proper form. All minutes of the meetings shall 10 be made available to the public upon request."

11 Section 17. The Code of the Federated States of Micronesia, 12 as amended, is hereby further amended by enacting a new section 13 221 to chapter 2 of title 27 as follows:

14 "Section 221. Delegation of Board’s Powers.

15 (1) The Board may, from time to time, by notice in 16 writing under the hand of the Chairperson, delegate to 17 any person or committee any of the Board’s powers under 18 this Act.

19 (2) A delegation under this section may be made to a 20 specified person or committee, or holder for the time 21 being of a specified office or to the holders of offices 22 of a specified class.

23 (3) A delegation may be made subject to such 24 restrictions and conditions as the Board thinks fit, and 25 may be made either generally or in relation to any 11 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 particular case or class of cases.

2 (4) A person or committee purporting to exercise a 3 power of the Board by virtue of a delegation under this 4 section must, when required to do so, produce evidence 5 of authority of the person or committee to exercise the 6 power."

7 Section 18. The Code of the Federated States of Micronesia, 8 as amended, is hereby further amended by enacting a new section 9 231 to chapter 2 of title 27 as follows:

10 "Section 231. Appointment of Chief Executive Officer.

11 (1) The Board must appoint a Chief Executive Officer 12 on such terms and conditions as the Board may determine.

13 (2) The CEO -

14 (a) shall serve at the pleasure of the Board;

15 (b) shall have had not less than five years 16 experience in the oil industry, or the equivalent 17 experience in a related profession;

18 (c) shall not engage in any other business 19 without the prior consent of the Board;

20 (d) shall be responsible for the day to day 21 operation of the Corporation;

22 (e) shall be responsible for the proper 23 administration and management of the functions and 24 affairs of the Corporation;

25 (f) shall be responsible for developing a five- 12 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 year plan and an annual plan describing the medium and 2 short term goals of the Corporation; and

3 (g) must perform such other functions and duties 4 as the Board may determine.

5 (3) The Board shall review the performance of the

6 Chief Executive Officer at least annually in light of 7 the Corporation’s goals and objectives, and may 8 terminate the CEO at any time, for any reason.

9 (4) If the CEO is temporarily absent from FSM, or 10 temporarily unable to perform the duties of office, the

11 Board may, appoint a person to act in the place of the

12 CEO during that period."

13 Section 19. The Code of the Federated States of Micronesia, 14 as amended, is hereby further amended by enacting a new section 15 232 to chapter 2 of title 27 as follows:

16 "Section 232. Appointment of Chief Financial Officer.

17 The CEO shall appoint, with the concurrence of the

18 Board, a Chief Financial Officer, for such term as shall 19 be directed by the Board. He shall receive and disburse 20 all funds of the Corporation. The Chief Financial

21 Officer shall serve at all times under the direct 22 supervision of the CEO."

23 Section 20. The Code of the Federated States of Micronesia, 24 as amended, is hereby further amended by enacting a new section 25 233 to chapter 2 of title 27 as follows: 13 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 "Section 233. Appointment of Health and Safety Officer.

2 The CEO shall appoint, with the concurrence of the

3 Board, a Health and Safety Officer. The Health and

4 Safety Officer, whose duties may be combined with those 5 of another position, shall be responsible for ensuring 6 compliance with all health, safety and environmental 7 laws and for developing, with input from the Board and 8 the Executive Council, health, safety and environmental 9 policies for the day-to-day operation of the

10 Corporation."

11 Section 21. The Code of the Federated States of Micronesia, 12 as amended, is hereby further amended by enacting a new section 13 234 to chapter 2 of Title 27 as follows:

14 "Section 234. Appointment of Other Officers and Staff.

15 To the extent consistent with this Title, the CEO may 16 appoint, retain and terminate, on such terms and 17 conditions as the Board may determine, such officers, 18 employees, agents, or consultants as may be necessary or 19 expedient for carrying out the functions and duties of 20 the Corporation."

21 Section 22. The Code of the Federated States of Micronesia, 22 as amended, is hereby further amended by enacting a new section 23 241 to chapter 2 of title 27 as follows:

24 "Section 241. Functions of the Corporation. The 25 functions of the Corporation are - 14 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (1) to operate and manage the Works, either directly 2 or through contracting out such management to third 3 parties;

4 (2) to secure contracts with Product suppliers who 5 will provide the required fuel Products at the lowest 6 cost through competitive bidding to the extent 7 practicable;

8 (3) to provide oil and gas distribution services on 9 the basis of commercially accepted practices, treating 10 all purchasers of Products on equitable terms in 11 accordance with its published prices and requiring all 12 users to pay for fuel purchased; provided that nothing 13 in this subsection shall prevent the Corporation from 14 using subsidies received from governmental, 15 international or private sources to reduce the overall 16 costs charged to users of public utilities services;

17 (4) to plan for the continued security of Product 18 supply in the FSM;

19 (5) to maintain and operate the Works so as to 20 minimize the likelihood of interruption of supply, and 21 to handle the Product in a manner that protects the 22 environment, the safety, and the health of employees and 23 the public;

24 (6) to make safety, health and environmental 25 considerations a priority in planning, and in the 15 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 development of new Products and processes; to advise 2 promptly, appropriate officials, employees, customers 3 and the public of information on significant industry- 4 related safety, health and environmental hazards, and to 5 recommend protective measures;

6 (7) to invest surplus revenues of the Corporation in 7 the maintenance, expansion and improvement of Product 8 facilities and services;

9 (8) to represent the Federated States of Micronesia 10 with regard to regional fuel supply initiatives as 11 requested by the Government of the Federated States of

12 Micronesia; and

13 (9) to do all those things which shall be necessary or 14 incidental to the performance of its functions under 15 this Chapter."

16 Section 23. The Code of the Federated States of Micronesia, 17 as amended, is hereby further amended by enacting a new section 18 242 to chapter 2 of title 27 as follows:

19 "Section 242. Powers of the Corporation.

20 (1) In performing the functions authorized under this

21 Chapter or under any other law of the Federated States 22 of Micronesia, the Corporation shall have the capacity 23 to exercise all powers normally exercised by a 24 corporation, including, but not limited to, the 25 following: 16 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (a) to adopt, alter, and use a corporate seal;

2 (b) to adopt and amend bylaws governing the 3 conduct of its business and the exercise of its powers;

4 (c) to sue and be sued in its corporate name;

5 (d) to acquire, in any lawful manner, real, 6 personal, or mixed property, either tangible or 7 intangible; to hold, maintain, use, and operate such 8 property; and to sell, lease, or otherwise dispose of 9 such property;

10 (e) to, subject to Section 251 and the laws of 11 the Federated States of Micronesia, borrow or raise any 12 sum or sums of money and to issue corporate bonds on 13 such security and upon such terms as may from time to 14 time be deemed necessary for the expansion and 15 improvement of the Works;

16 (f) to retain and terminate the services of 17 employees, agents, attorneys, auditors, and independent 18 contractors upon such terms and conditions as it may 19 deem appropriate; and

20 (g) to do all such other things as may be deemed 21 incidental to or conducive to the attainment of the 22 responsibilities of the Corporation.

23 (2) Without limiting the generality of the powers 24 given to it by subsection (1), and in addition to any 25 other powers provided for by this Act, the Corporation 17 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 shall have the following specific powers -

2 (a) to acquire, lease, construct, maintain and 3 operate facilities, plant, equipment and infrastructure 4 associated with the supply of Product and the related 5 activities of the Corporation; to erect Works, and 6 install any necessary equipment, machinery and plant for 7 any purpose related to the functions of the Corporation;

8 (b) to acquire, lease and take over in any lawful 9 manner the business, property, assets, and liabilities 10 of any preexisting entity relating to fuel storage and 11 distribution;

12 (c) to purchase, lease or otherwise acquire and 13 maintain such personal and real property as the

14 Corporation may from time to time deem necessary for the 15 furtherance of its functions;

16 (d) to do all such things as it deems expedient 17 to enter into any contract for the sale, lease or 18 purchase of property related to the performance of its 19 functions;

20 (e) to hire out plant or equipment of the

21 Corporation and to enter into contracts for its 22 operation and management;

23 (f) to fix, charge and recover rates and fees for 24 the supply of Product and for any other service provided 25 by the Corporation; 18 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (g) to fix, charge and recover any surcharge on 2 rates and fees for the supply of Product during any 3 period when it may be reasonably anticipated that the 4 supply of Product may be affected by a shortage of 5 supply;

6 (h) to ration or differentially allocate the 7 supply of Product consistent with reasonable business 8 practices and the needs of customers;

9 (i) to recover the capital cost of supplying

10 Product or providing other services to particular 11 premises on such terms and conditions as the Corporation 12 determines;

13 (j) to investigate any failure to comply with 14 this Act, or any act that effects the ability of the

15 Corporation to provide services under this Act, and to 16 take such steps as it considers necessary to secure 17 compliance with this Act or to prevent interference with 18 the activities of the Corporation; and

19 (k) to set and to enforce standards for work done 20 by contractors and tradesmen relating to the supply of

21 Product and any other service provided by the

22 Corporation."

23 Section 24. The Code of the Federated States of Micronesia, 24 as amended, is hereby further amended by enacting a new section 25 243 to chapter 2 of title 27 as follows: 19 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 "Section 243. Executive Council May Give Direction and

2 Require Information. The powers, functions and 3 discretion of the Corporation, its Board of Directors 4 and its officers shall be subject to the right and power 5 of the Executive Council to -

6 (1) request, and obtain from the Corporation, such 7 returns, accounts, and other information as the

8 Executive Council may, from time to time, require, and 9 to institute any investigation, hearing, audit or other 10 informational process as the Executive Council shall 11 deem appropriate; and

12 (2) set the terms and timing of any subsequent 13 divestment of the assets and operations of the

14 Corporation or for the issuance of common shares of the

15 Corporation; provided any such divestment must provide 16 for the payment or satisfaction of all indebtedness 17 incurred in the formation and operation of the

18 Corporation for which the Government of the Federated

19 States of Micronesia may be obligated or a full and 20 complete release of the Government of the Federated

21 States of Micronesia from liability for the repayment of 22 such loans or indebtedness."

23 Section 25. The Code of the Federated States of Micronesia, 24 as amended, is hereby further amended by enacting a new section 25 251 to chapter 2 of title 27 as follows: 20 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 "Section 251. Debts and obligations of the Corporation.

2 (1) Unless otherwise expressly provided by law, the 3 debts and obligations of the Corporation shall not be 4 debts or obligations of the Government of the Federated

5 States of Micronesia or of a Government of a State, nor 6 shall the Government of the Federated States of

7 Micronesia or that of a State be responsible for any 8 such debts or obligations.

9 (2) Unless an express assumption of liability shall be 10 executed by the Corporation and approved by Resolution 11 of Congress, the Corporation shall not assume, or be 12 deemed to have assumed, the liability of any third party 13 whose assets or operations are acquired by the

14 Corporation, including, without limitation, liabilities 15 arising from any breach of legal or contractual 16 obligation or arising from violation of any law, rule, 17 ordinance, regulation or decree.

18 (3) During such periods of time there remains 19 outstanding any loans or obligations payable to the

20 Government of the Federated States of Micronesia or any 21 loans or obligations payable by the Corporation to any 22 other party for which the Government of the Federated

23 States of Micronesia may be a guarantor, borrower or 24 otherwise obligated, no new loans or indebtedness

25 (except credit extended pursuant to energy/fuel supply 21 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 agreements) in excess of an aggregate amount of 2 $1,000,000 shall be incurred unless approved by

3 Resolution of Congress."

4 Section 26. The Code of the Federated States of Micronesia, 5 as amended, is hereby further amended by enacting a new section 6 252 to chapter 2 of title 27 as follows:

7 "Section 252. Funds of the Corporation.

8 (1) The funds of the Corporation consist of -

9 (a) money appropriated from time to time by the

10 FSM Congress and the State legislatures and paid to the

11 Corporation;

12 (b) money derived from the disposal, lease, or 13 hire of, or any other dealing with, any property vested 14 in or acquired by the Corporation;

15 (c) money borrowed by the Corporation in 16 accordance with subsection (2);

17 (d) income from interest referred to in 18 subsection (3); and

19 (e) except as provided herein, any other moneys 20 that may become payable to the Corporation in respect of 21 the sale of Product or any matter incidental to its 22 functions and powers.

23 (2) Subject to Section 251, the Corporation may borrow 24 such sums as shall be required by the Corporation to 25 meet any of its obligations or to perform any of its 22 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 functions.

2 (3) The Corporation shall, to the extent practicable, 3 maintain its funds in the form of liquid, interest 4 bearing bank deposits or such other investments as shall 5 be approved in writing by the Board.

6 (4) The Corporation shall conserve its funds by 7 performing its functions and exercising its powers under 8 this Chapter so as to ensure that the total revenues of 9 the Corporation are sufficient to meet all sums properly 10 chargeable to its revenue account including depreciation 11 and interest on capital."

12 Section 27. The Code of the Federated States of Micronesia, 13 as amended, is hereby further amended by enacting a new section 14 253 to chapter 2 of title 27 as follows:

15 "Section 253. Annual Budget and Costs of

16 Administration.

17 (1) At such time and in such manner as the Board may 18 prescribe, the Chief Financial Officer shall submit to 19 the Board and to the Executive Council a detailed budget 20 for the next ensuing fiscal year which shall include:

21 (a) for the last completed fiscal year, audited 22 accounts indicating the prevailing rates and charges 23 applicable to the Product, the amount of gross income 24 generated by the Corporation, and the amount of all 25 capital and operational expenditures made by the 23 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 Corporation, together with the closing balance of all 2 bank accounts maintained by the Corporation;

3 (b) for the fiscal year in progress, a statement 4 showing the estimated amount of gross income and the 5 estimated amount of all capital and operational 6 expenditures made by the Corporation, together with such 7 summaries, schedules, and supporting data as the Board 8 may deem necessary; and

9 (c) for the next ensuing fiscal year, a budget 10 showing anticipated rates and charges for the Product, 11 the estimated amounts of gross income of the Corporation 12 and a statement of all estimated capital and operational 13 expenditures anticipated by the Corporation.

14 (2) In the event the expenditures identified in 15 subsection 1(c) are anticipated to exceed the estimated 16 amount of gross income to be generated by the

17 Corporation in the next ensuing fiscal year, plus 18 appropriations, grants, loans or subsidies fully 19 approved by the Congress of the Federated States of

20 Micronesia and the amount of any funds, including the 21 balance of any applicable capital expenditure sinking 22 funds earmarked for the current year’s expenditures, 23 carried over from previous fiscal years, the proposed 24 budget shall include a plan for financing the deficit.

25 (3) For any fiscal year during which the Corporation 24 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 is expected to have outstanding loan balances owing to 2 the Federated States of Micronesia or in which the

3 Federated States of Micronesia continues to be obligated 4 or liable for repayment of any portion of a loan or debt 5 of the Corporation, or if the proposed plan to finance a 6 budget deficit pursuant to subsection (2) above includes 7 a grant, loan, guarantee or subsidy from the Federated

8 States of Micronesia, the budget of the Corporation 9 shall be submitted to Congress for approval and no 10 further loans or indebtedness shall be incurred by the

11 Corporation until the budget has been approved by

12 Resolution of Congress."

13 Section 28. The Code of the Federated States of Micronesia, 14 as amended, is hereby further amended by enacting a new section 15 254 to chapter 2 of title 27 as follows:

16 "Section 254. Accounts, Annual Report, and Audit.

17 (1) The Board, the CEO and the Chief Financial Officer 18 of the Corporation are jointly responsible for ensuring 19 that the Corporation at all times keeps adequate 20 accounts of its transactions and financial affairs, and 21 must, without limitation, ensure that -

22 (a) all moneys received by the Corporation are 23 properly brought to account;

24 (b) all payments by the Corporation are properly 25 authorized; 25 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 (c) adequate control is maintained over the

2 Corporation’s property and the incurring of liabilities; 3 and

4 (d) the accounts are kept in accordance with 5 generally accepted accounting principles.

6 (2) Within three months after the end of each 7 financial year, the Chief Financial Officer must prepare 8 a report of the Corporation’s activities during the 9 financial year (referred to as the "Annual Report") and 10 shall submit a copy of the Report to the Secretary, the

11 Board and to the Executive Council.

12 (3) The Annual Report must contain, among other things 13 -

14 (a) a statement of financial performance, which 15 shall include a balance sheet, operating statements, a 16 statement of changes in financial position, and an 17 analysis of changes in retained earnings;

18 (b) a statement summarizing the rates and charges 19 prevailing throughout the prior year with respect to the

20 Product and the outlook for such rates in the coming 21 year;

22 (c) a statement concerning the condition of the

23 Works and the capital expenditure plan of the

24 Corporation;

25 (d) the CEO’s one and five-year plans required 26 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 pursuant to section 231 of this Chapter; and

2 (e) such other information as is required to give 3 a true and fair view of the Corporation’s financial and 4 operational affairs.

5 (4) The annual accounts of the Corporation must be 6 audited by the FSM Public Auditor. For this purpose, the

7 Chief Financial Officer must, within three months after 8 the end of each financial year submit to the Public

9 Auditor -

10 (a) the statement of financial performance and 11 accompanying accounts of the Corporation for the year;

12 (b) the most recent budget prepared pursuant to 13 section 253; and

14 (c) the Annual Report for the year prepared in 15 accordance with subsection (2)."

16 Section 29. The Code of the Federated States of Micronesia, 17 as amended, is hereby further amended by enacting a new section 18 255 to chapter 2 of title 27 as follows:

19 "Section 255. Tax liability. The Corporation shall be 20 liable for the payment of any tax, assessment or 21 contribution as may be required by law. Nothing herein 22 shall be deemed to exempt employees and independent 23 contractors of the Corporation from any tax liability 24 for services rendered to the Corporation.

25 Section 30. The Code of the Federated States of Micronesia, 27 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 as amended, is hereby further amended by enacting a new section 2 261 to chapter 2 of title 27 as follows:

3 "Section 261. Operating Standards. The Board, the CEO 4 and the Health and Safety Officer of the Corporation 5 shall be jointly responsible for developing and 6 implementing written operational policies that shall set 7 forth the manner in which the Corporation is to --

8 (1) manage its business with the goal of preventing 9 incidents and of controlling emissions and wastes to 10 below harmful levels, and to design, operate, and 11 maintain facilities to this end and to respond quickly 12 and effectively to incidents resulting from its 13 operations;

14 (2) design and maintain facilities, establish 15 management systems, provide training and conduct 16 operations in a manner that safeguards people and 17 property;

18 (3) identify and manage risks associated with its 19 products and to ensure that Product is not manufactured 20 or sold when it is not possible through proper design, 21 procedures, and practices to provide an appropriate 22 level of safety for people and the environment;

23 (4) specify precautions required in handling, 24 transporting, using, and disposing of Product and to 25 take reasonable steps to communicate those precautions 28 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 to employees, customers, and others who might be 2 affected;

3 (5) comply with all applicable environmental and 4 industrial and product safety laws and regulations and 5 to apply responsible standards where laws and 6 regulations do not exist;

7 (6) furnish services that reliably meet responsible 8 standards of performance, efficiency, and courtesy; to 9 furnish accurate and sufficient information about its 10 products and services, including details of guarantees 11 and warranties, so that customers can make informed 12 purchasing decisions; and where the Corporation's 13 products reach the ultimate consumer through independent 14 parties, such as service station dealers and 15 distributors, to actively encourage such parties to 16 achieve standards comparable to those which have been 17 established for the Corporation's own performance; and

18 (7) undertake appropriate reviews and evaluations of 19 its operations to measure progress and to foster 20 compliance with these policies."

21 Section 30. The Code of the Federated States of Micronesia, 22 as amended, is hereby further amended by enacting a new section 23 262 to chapter 2 of title 27 as follows:

24 "Section 262. Contracts.

25 (1) The purchase of all supplies and materials and the 29 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 construction of all works by independent contractors, 2 when the expenditure exceeds $20,000, shall be, by 3 contract, let to the lowest responsible bidder whose 4 offer adequately responds in quality, fitness, and 5 capacity to the particular requirements of the proposed 6 work or materials and supplies called for by the 7 contract; provided that Product quality and reliability 8 of Product supply shall be taken into account when 9 evaluating fuel supply agreements; and provided further 10 that any initial fuel supply agreement and facilities 11 operation agreement executed as part of a transaction by 12 which the Corporation acquires the Works shall be exempt 13 from such requirement. A notice requesting bids shall be 14 published at least ten days before bids are received.

15 The lowest responsible bidder shall be determined by the

16 CEO using sound judgment and after consultation with the

17 Board. The Board may reject any and all bids and re- 18 advertise at its discretion.

19 (2) If, after rejecting bids for materials and 20 supplies, the Board determines that, in its opinion, the 21 materials and supplies may be purchased at a lower price 22 in the open market, the Board may authorize such 23 purchases without further observance of the provisions 24 requiring contracts, bids or notices.

25 (3) In case of major public calamity, or whenever it 30 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 is in the interest of public safety or necessary to keep 2 public utilities services operational, the Board may 3 determine that the public interest and necessity demand 4 the immediate expenditure of funds to keep the services 5 operational or in a safe condition, and thereupon 6 authorize the expenditure of such sums as may be needed 7 without the observation of the provisions requiring 8 contracts, bids or notices.

9 (4) Where reasonable, preference in the letting of 10 contracts shall be given to local contractors based on 11 the procedure provided by Section 405, Title 55 of the

12 FSM Code.

13 (5) No director shall vote on any contract awarded by 14 the Board in which the director has a direct or indirect 15 financial interest."

16 Section 31. The Code of the Federated States of Micronesia, 17 as amended, is hereby further amended by enacting a new section 18 263 to chapter 2 of title 27 as follows:

19 "Section 263. Power to discontinue or ration supplies.

20 (1) In addition to any other powers of the Corporation 21 under this Act, the Corporation may, without notice, 22 discontinue, ration or limit any supply of Product or 23 other service provided by it if it considers it 24 necessary or desirable to do so -

25 (a) by reason of a disruption of international 31 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 supplies;

2 (b) by reason of any accident or emergency;

3 (c) to facilitate any work done or to be done by 4 the Corporation;

5 (d) to avoid or limit pollution; or

6 (e) for the conservation of strategic product 7 reserves.

8 (2) As soon as possible after it has taken any action 9 under sub-section (1) the Corporation shall give notice 10 of its action and indicate the likely duration of the 11 discontinuance or rationing.

12 (3) The Corporation shall not be liable to any person 13 for any loss or damage suffered by that person, and no 14 person shall have a claim against the Corporation, where 15 there is an increase, diminution or discontinuance in 16 the supply of Product or any other service provided by 17 the Corporation, or where there is a diminution in the 18 quality of products, provided that such increase, 19 diminution or discontinuance is caused by accident, 20 other natural phenomenon or other unavoidable cause, by 21 the Corporation acting in good faith in the proper 22 exercise of its functions, or by the exercise by the

23 Corporation of a power under this Act.

24 (4) Without limiting the foregoing, if any fees or 25 charges in respect of any customer, including 32 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 governments or governmental units of any type, remain 2 unpaid thirty (30) calendar days after the date due for 3 payment, the CEO may discontinue the supply of Product 4 and services to that customer and may commence legal 5 action to recover any rates, fees or charges that have 6 fallen due for payment."

7 Section 32. The Code of the Federated States of Micronesia, 8 as amended, is hereby further amended by enacting a new section 9 264 to chapter 2 of title 27 as follows:

10 "Section 264. Transition; Employees. The Corporation 11 may, at its discretion, undertake to hire employees in 12 good standing of pre-existing entities involved in the 13 business of oil and gas distribution in the FSM, 14 provided that the Corporation shall be under no 15 obligation to do so with respect to any particular 16 employee, nor shall it be required to hire employees at 17 the same salaries or to fill the same positions as they 18 may have enjoyed previously. In the event employees of a 19 pre-existing entity are employed by the Corporation, all 20 accrued benefits, sick leave, annual leave and other 21 contractual obligations owed by the pre-existing entity 22 to its employees shall remain the obligations of that 23 entity and shall not be assumed by the Corporation, 24 except to the extent directed in writing by the Board."

25 Section 33. The Code of the Federated States of Micronesia, 33 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08 1 as amended, is hereby further amended by enacting a new section 2 265 to chapter 2 of title 27 as follows:

3 "Section 265. Issuance of Shares; divestment.

4 (1) Upon the written instruction of the Executive

5 Council, the Corporation shall, through the filing of 6 such documents as may be required of privately-held 7 corporations, including, without limitation, Articles of

8 Incorporation, Bylaws and Share Affidavits, capitalize 9 itself through the issuance of common shares and, in 10 such event, the provisions of this Chapter shall be made 11 subject to the terms of the Articles of Incorporation 12 and Bylaws, and nothing in this Chapter shall be read as 13 restricting the payment of dividends, the holding of 14 annual shareholder’s meetings, the conduct of audits for 15 the benefit of shareholders, the election of Directors 16 and such other corporate governance and shareholder’s 17 rights provisions as may be set out in the Articles of

18 Incorporation and Bylaws and approved by the Executive

19 Council.

20 (2) Upon the written instruction of the Executive

21 Council, the Corporation shall, subject to the 22 conditions set forth in Section 243, take all necessary 23 steps to divest its assets and operations, in whole or 24 in part, to such entity or entities as shall be directed 25 by the Executive Council. The Board and officers of the 34 of 35 CONGRESSIONAL BILL NO. 15-39, C.D.1, C.D.2, C.D.3, C.D.4 PC NO. 15-62 PUBLIC LAW NO. 15-08

1 Corporation shall take all necessary actions to 2 effectuate such divestment, including the execution of 3 documents and instruments, and the turnover of books, 4 records and personal property as shall be necessary to 5 transfer operations and assets of the Corporation to the 6 entity or entities designated by the Executive Council.

7 Upon written instruction of the Executive Council 8 following such divestment, the Corporation shall wind up 9 its affairs and cease operation."

10 Section 34. Effectiveness. This act shall become law upon 11 approval by the President of the Federated States of Micronesia or 12 upon its becoming law without such approval. 13 14 15 16

17 September 11, 2007 18 19 20 21 22 /s/ Manny Mori Manny Mori

23 President Federated States of Micronesia 24 35 of 35